On March 1, a U.S. District Court in New York will start the trial of what is alleged to be the largest-ever sanctions evasions scheme, a $20 billion plan prosecutors say was carried out by Turkey’s state-owned Halkbank, in connivance with top Turkish government officials, to help Iran sidestep punishing U.S. economic sanctions.
If Halkbank is found guilty and ends up frozen out of the U.S. financial system, the economic implications for an already reeling Turkish economy could be massive. Likewise, the political aftershocks in Turkey from the trial’s outcome could be devastating for Turkish President Recep Tayyip Erdogan, who has tried to blame political enemies for the whole scheme.
Since the U.S. case began more than four years ago, the Trump White House has repeatedly sought to shield Halkbank from paying any penalty for its role in helping Iran, including firing a pair of federal prosecutors handling the case and asking top cabinet officials to pressure the Justice Department to drop it.
All the while, one big question has lingered: Why would U.S. President Donald Trump—whose administration has taken a hard-line stance against Iran, including what it describes as a “maximum pressure” campaign to strangle its economy—repeatedly try to shield one of Iran’s biggest helpers in evading those very sanctions?
The simple answer? It appears that Trump never understood the charges against the bank or how they related to Iran—and he just wanted to do a favor for his fellow strongman, Erdogan.
“Despite being told what Halkbank was being investigated for, I’m still not certain he ever fully appreciated it was for violating U.S. sanctions against Iran and then committing financial fraud by lying about the violations,” said former National Security Advisor John Bolton, who had sought to explain the case to the president. “I don’t think Trump ever fully internalized what the nature of the underlying charges was.”
Bolton explained that the approach had to do with Trump’s fascination with authoritarian leaders—and his personalized, transactional approach to foreign policy.
“I think Trump was just taken with how [Chinese President] Xi [Jinping], [Russian President Vladimir] Putin, and Erdogan could just sort of do things in their respective countries and not have to account for it, so you could make a big gesture and forget the normal procedures of, in this case, law enforcement,” Bolton told Foreign Policy.
The scheme that prosecutors say is the biggest effort to evade sanctions in history began in late 2012 at the urging of Erdogan, then Turkey’s prime minister, according to testimony by the man at the heart of the plan, Turkish Iranian gold trader Reza Zarrab. The plan was for Iran to turn its oil and gas exports into gold that it could actually access—something made more difficult by existing U.S. sanctions.
Even after U.S. sanctions officials warned Halkbank in early 2013 that it was “in a category unto themselves” when it came to potential involvement in an Iranian sanctions evasion gambit, bank managers and Zarrab found a way to carry on.
“These allegations are in a sense unprecedented in terms of the gravity and scope of the alleged deception and evasion,” said John Smith, a former director of the U.S. Treasury Department’s Office of Foreign Assets Control and now a partner at Morrison & Foerster.
And even after the bank got shut down once, after a late 2013 raid by Turkish law enforcement, the bank was soon back in operation. According to the U.S. indictment, Zarrab paid bribes to secure his and his co-defendants’ release and secure dismissal of the case in 2014. He then appealed to Halkbank to restart the sanctions evasions scheme; Erdogan and his associates “instructed Halkbank to resume the scheme, and Halkbank agreed,” the indictment noted.
The scheme continued until Zarrab decided to take a trip to Disney World; in March 2016, he was arrested in Miami, finally shutting down the program for good.
Almost immediately, and for years afterward, the Turkish government began pressuring U.S. officials to drop the case—starting by leaning on then-Vice President Joe Biden. Erdogan later tried to get then-President Barack Obama to intervene. Both Biden and Obama flat-out refused.
But then came the inauguration of Trump. In February 2017, Rudy Giuliani, a White House advisor and later the president’s personal lawyer, and Michael Mukasey, the former attorney general under George W. Bush, who had begun representing Zarrab, flew to Turkey to discuss the case with Erdogan. In March 2017, Preet Bharara, the U.S. attorney for the Southern District of New York—which was overseeing the Halkbank case—was fired, despite Trump’s prior guarantee he would stay on. But the case continued.
Later in 2017, Trump tried to get then-Secretary of State Rex Tillerson to pressure the Justice Department to drop the case against Zarrab. Tillerson said that he refused to do so and objected to Trump’s efforts, considering them illegal interference.
Tillerson told Foreign Policy that he was “not really sure that [Trump] understood the magnitude of the Halkbank case,” and he tried to explain the gravity to the president, with no success. Giuliani and Mukasey kept pressing Tillerson to intervene in the case, and he said he told them: “Y’all are barking up the wrong tree here because you’re not going to find an agency in the government that is going to advise the government to do this.” Tillerson warned then-Attorney General Jeff Sessions to expect similar pressure from Trump—which duly came, and which Sessions rebuffed. “We can’t drop the case,” Sessions told Trump, Tillerson recalled.
For years, Turkey—and lobbyists it hired in Washington—kept trying to get officials in the Trump administration to make the Halkbank investigation go away. Trump tried to get Sessions’s successors, former acting Attorney General Matthew Whitaker and former Attorney General William Barr, to drop cases against Zarrab, Attila, and the bank. Barr led efforts to negotiate a deal wherein the bank would avoid charges.
And Trump’s personal involvement continued. At the Dec. 1, 2018, G-20 meeting in Buenos Aires, Trump and Erdogan met and discussed the sanctions case. Trump told Erdogan he “would take care of things,” Bolton recalled in his recent book. Erdogan presented Trump with a memo from King & Spalding, which represented Halkbank, Bolton wrote. Trump quickly flipped through the pages and then said that he believed Halkbank was innocent.
“I can tell you Trump didn’t read the papers. He literally just turned the pages. It was part of the ‘I’m a big guy, I don’t need to read the papers, I’ll just take his word for it, it looks very persuasive,’” Bolton told Foreign Policy. “It was really pretty stunning. But it had the effect that he wanted on Erdogan.”
Two weeks later, the leaders spoke on the phone, and Trump, according to Bolton, told his Turkish counterpart that “we were getting very close to a resolution on Halkbank.” In April 2019, Trump told Erdogan that he had assigned Barr and Treasury Secretary Steven Mnuchin to handle the issue. That month, at an Oval Office meeting, Trump, his son-in-law Jared Kushner, and Mnuchin met Berat Albayrak, Erdogan’s son-in-law and Turkey’s treasury minister at the time. According to the indictment, Albayrak is implicated in the scheme. Mnuchin had six additional meetings with senior Turkish leadership between 2017 and 2019. The effort continued even into 2020, when Trump ordered the firing of yet another Southern District of New York prosecutor, this time Geoffrey Berman.
Bolton, in his book, noted Trump’s penchant to do personal favors for dictators he liked. But in the Halkbank case, doing a favor for an autocrat amounted to a direct conflict with stated U.S. interests—and U.S. law.
Bolton said Trump’s fascination with authoritarian leaders is rooted in a racketeering kind of exchange where Trump would reason, “Oh, you need a favor, I’ll do you a favor,” knowing that he could go back to Erdogan for a favor in return. Bolton said Trump told Erdogan: “I’m just doing it for you personally.”
Neither the White House nor the Turkish Embassy in Washington responded to requests for comment.
The Trump administration never put forth any national security interest as a reason to quash the case—and would be hard pressed to, since turning a blind eye to a massive Iranian effort to evade sanctions and secure billions of dollars works directly against U.S. national security.
“There would not be more serious types of charges than the allegations that the U.S. financial system was used and abused in a way that undermined the integrity of those sanctions against Iran in that period where a nuclear weapons program was something that was a real possibility,” said Smith, the former Office of Foreign Assets Control head.
Tillerson said that there was never a foreign-policy or strategic objective behind the president’s behavior with Erdogan and Halkbank.
“That’s what always made it very difficult in dealing with situations where the president seemed to want to grant relief to very authoritarian figures, whether it’s Erdogan or [North Korean leader] Kim [Jong Un] or go down the list,” he said.
“There were other occasions where Erdogan would ask the president to do certain things and myself or others would intervene and explain to the president that it’d be not only difficult to do but potentially illegal to do so,” he added.
Prior sanctions evaders—like the French bank BNP Paribas—had been punished with massive fines. But the deterrence value of sanctions goes away if the biggest evaders can get off the hook. Tillerson warned the president: “It’s both the precedent and the fact that if you’re not willing to prosecute these guys for these the most egregious violations under the sanctions laws, then what are you going to do in the future, with anybody?”
In many ways, Trump’s handling of Turkey and the Halkbank case mirrored his broader relationship with Ankara. When Turkey bought Russian-made air defense systems, punishable by mandatory sanctions under U.S. law, Trump dithered. When Turkey asked Trump to pull U.S. troops out of northern Syria and clear the way for a Turkish offensive that would threaten U.S. Kurdish partners on the ground, Trump complied.
“In a lot of bilateral issues between the U.S. and Turkey, for reasons that remain somewhat inexplicable, Trump appeared perfectly happy to take Erdogan’s side,” said Nicholas Danforth, a nonresident senior research fellow at the Hellenic Foundation for European and Foreign Policy. In both the Russian weapons and the Halkbank case, Trump’s efforts to accommodate Erdogan involved undermining the rule of law in the United States, Danforth noted.
“I haven’t heard anyone put forward a plausible national security case for dismissing or downplaying the Halkbank issue,” Danforth said. “It’s a tribute to how much we’ve accepted about the irrationality of this administration, that that is not even a part of the conversation.”
Jury selection in the Halkbank trial begins next month; a few weeks later, after years of failed Turkish efforts to quash the case, the trial will begin. And so will Erdogan’s political and economic headaches, said Aykan Erdemir, a former member of the Turkish parliament and currently the senior director of the Turkey Program at the Foundation for Defense of Democracies.
The Turkish president’s alleged direct involvement in the case—especially his insistence on restarting the scheme even after it was first shut down—undermines his attempts to scapegoat rivals for the mess and leaves him and the country potentially vulnerable. It also explains Erdogan’s yearslong crusade to get the case dropped.
“There was a massive scheme to bust U.S. sanctions, and Turkey’s ministers and senior officials of Turkey’s second largest public lender colluded with Iranian operatives to make it possible, with Erdogan’s blessing,” Erdemir said.
“It was my conclusion that the reason that Erdogan was taking such a persistent interest in this matter was he was worried about what would emerge or be revealed of his own involvement in this as well as in other things,” Tillerson said.
Trump’s Inexplicable Crusade to Help Iran Evade Sanctions The British Journal Editors and Wire Services/ Foreign Policy.